Mapletree Commercial Trust - DBS Research 2020-10-23: Shaking Off The Pandemic


Mapletree Commercial Trust - Shaking Off The Pandemic

  • Mapletree Commercial Trust's 1HFY21 DPU fell10% y-o-y to 4.17 Scts dragged by VivoCity, partially offset by MBC2 and release of S$15m capital allowance.
  • Committed occupancy healthy at 97.7%; tenant sales c.80% of pre-COVID levels, outpacing shopper traffic.
  • Highlights:
    1. -3.7% reversion mainly from VivoCity;
    2. reconfigured 2 areas in VivoCity with new tenants Shake Shack and Love, Bonito,
    3. upcoming rightsizing in office/ business parks but tight supply of quality assets to mitigate impact.

Mapletree Commercial Trust's 1HFY21 DPU slightly below:

Decline mainly from Vivocity due to COVID-19 offset by contributions from MBCII; released S$15m of capital allowances retained in 4QFY20.

  • Mapletree Commercial Trust (SGX:N2IU)'s 1HFY21 DPU fell 10% y-o-y to 4.17 Scts, slightly below our estimates, mainly due to decline in NPI mainly from Vivocity due to COVID-19, partially offset by contributions from Mapletree Business City II (MBC II) which was acquired on 1 Nov 2019 and S$15m of capital allowance claims which was retained in 4QFY20 (estimated remaining amount retained is c.S$28.7m).
  • Mapletree Commercial Trust's 1HFY21 revenue and net property income (NPI) declined 2.5% y-o-y and 2.6% y-o-y to S$219m and S$171m respectively. Similarly, the decline was mainly due to COVID-19 rental rebates disbursed partially offset by contributions from MBC II.
  • Revenue and NPI declines were largely from Vivocity (- 41% y-o-y and 43% y-o-y respectively) while the office / business parks portfolio (ex-MBC2) declined by 3% y-o-y and 2.6% y-o-y respectively.
  • Gearing was relatively stable at 33.8% (vs 33.7% in 1QFY21 and 33.3% in 4QFY20).
  • Average cost of debt reduced marginally to 2.57% vs 2.61% in 1QFY21 (2.94% in 4Q20).
  • Mapletree Commercial Trust has > S$600m of cash and undrawn committed facilities as at Sep20, providing ample liquidity to meet working capital and financial obligations.
  • In 1HFY20, Mapletree Commercial Trust recorded 2.3% decline (or S$203m) in valuation of its assets to S$8.7bn. Valuation of all assets declined with the larger declines from VivoCity (-3.5%), PSA Building (-3.8%), Mapletree Anson (-2%) and MBC II (-1.7%). There were no adjustments in cap rates.
  • NAV declined 2.2% to S$1.71 vs S$1.75 as at Mar20.

Mapletree Commercial Trust - Operational highlights:

Committed occupancy remains healthy; tenant sales recovered to c.80% of pre-COVID in Sep20 outpacing shopper traffic’s c.50%; -3.7% rental reversions mainly from VivoCity (-8.9%).

  • Mapletree Commercial Trust's portfolio’s committed occupancy declined marginally q-o-q to 97.7% vs 98.2% in 1QFY21 and 98.7% in 4Q20. The decline was mainly from PSA Building (-2.5ppts to 87.9%), Vivocity (-0.5ppt to 97.9ppt) and MBC I (- 0.5ppt to 98.2%).
  • Post the circuit breaker, Mapletree Commercial Trust saw encouraging resumption of shopper activities with tenant sales at c.80% of pre-COVID levels in Sep 2020, outpacing shopper traffic which was c.50% of pre-COVID levels in Sep 2020.
  • In 1H20, Mapletree Commercial Trust committed a total of 91 leases recording - 3.7% of rental reversions with high retention rate of 78%.
  • Retail portfolio committed a total of 71 leases with 79.1% retention rate but recorded -8.9% rental reversions partly due to the challenging operating environment and some impact from trade mix changes and units subdivided and/or amalgamated.
  • Office portfolio committed 20 leases with 77.5% retention rate and recorded -1.6% rental reversions. The negative rental reversions were partly due to the lease expiry of a major tenant at PSA Building.
  • Excluding the expiry of a major tenant’s short-term lease a t PSA Building in Aug 2020, the rental reversion for the portfolio was -0.9% and Office / Business Park was +2.9%.
  • Portfolio WALE was stable at 2.5 years (2.1 years for retail and 2.8 years for office/business park space).

COVID-19 impact: provided on average > 4mths of rental rebates with assistance tapering off in Aug-Sep20

  • Mapletree Commercial Trust has provided on average more than 4 months of rental rebates / waivers of fixed rents from Mar-Sep20. Assistance has tapered off post Circuit Breaker with rental rebate in Aug-Sep20 of c.0.2 months more targeted based on tenants’ actual sales performance.
  • Amid the pandemic, Mapletree Commercial Trust took the opportunity to reconfigure two areas at VivoCity, to generate more than 30% ROI on a stabilised basis for both initiatives –
    1. reconfigured Best Denki’s layout on L2 and doubled its shopfront while recovering prime space of 4.3k sqft that is leased out to Love, Bonito,
    2. revitalised the L1 promenade-facing F&B cluster and added 1 more F&B operator (3 previously) to the cluster. Target completion is 3QFY21 (year-end). New F&B operators include Shake Shack, Afuri Ramen, Green Common and Hoshino Coffee.

Mapletree Commercial Trust - Outlook

Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-10-23
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